Revising the Horizontal Merger Guidelines: Lessons from the US and the EU

Competition Policy and Antitrust

Article Snapshot


Richard Gilbert and Daniel Rubinfeld


In Competition Policy and Regulation: Recent Developments in China, the US and Europe, Michael Faure and Xinzhu Zang, eds., Northampton, MA: Edward Elgar Publishing, Inc., 2011, pp. 262-279


This paper presents suggestions for the US government’s upcoming revision of its methods for analyzing horizontal mergers.

Policy Relevance

The US Horizontal Merger Guidelines might be revised to more carefully consider the effects of mergers on firms’ incentives to invest in research and development.

Main Points

  • A horizontal merger occurs when two companies selling the same goods join to form a single company. For example, Comcast’s proposed purchase of Time-Warner Cable would represent a merger in the market for cable.
    • When competitors merge, they may be able to raise prices and so hurt consumers. Consequently, horizontal mergers are typically monitored by governments and may require approval.
  • Since 1982, the U.S. Horizontal Merger Guidelines have been used by the Department of Justice and the Federal Trade Commission to evaluate proposals for mergers between companies operating in the same market.
  • The Horizontal Merger Guidelines pay less attention to mergers that result in a post-merger market share of less than 35%. This level is somewhat arbitrary, and smaller mergers may still harm consumers.
  • In order to analyze the likely effects of a horizontal merger on a market, it is first necessary to define a market. This is a challenging problem when markets contain a variety of products or when geography is important.
    • For example, it is not obvious whether a market for colas exists independently from a market for other sodas, or how far apart hospitals may be before being considered to operate in separate markets.
    • It may be useful for merger guidelines to focus on the effects of mergers while remaining flexible in prescriptions for defining markets.
    • Market definition exercises in technology markets require special attention to the intellectual property of merging firms and their competitors.
  • Horizontal mergers may decrease the incentive of firms to innovate if:
    • the merging firms previously invested in developing competing products,
    • the merging firms represent a large fraction of the market’s research and development expenditures,
    • it is hard for new firms to start similar research programs, and
    • the benefits of sharing the results of research for an innovating firm are low.


Get The Article

Find the full article online

Search for Full Article